Hello, My name is Evan Duffield And this is a video series about Dash And in this video, we're going to be covering the incentivized infrastructure of the Dash Network

And how our Masternodes actually work So why would you incentivize the infrastructure of a network like Dash? And, you have to go back to a centralized corporation which has infrastructure, and as they grow their infrastructure gets larger and more costly to maintain With decentralized projects, the infrastructure oftentimes is at the expense of the users or companies that are utilizing the network And, this simply means that as costs rise, the people that are running the infrastructure can actually get squeezed out

And then, they'll stop running the infrastructure And the network weakens over time And so we provide incentives to run the infrastructure which makes it more robust and scalable Bitcoin is not economically efficient And, it's actually broken

The issue is, that if you look back in it's really early days it started out with about 100,000 full nodes And then more recently, it's fallen to like 6000 full nodes The spare capacity for the network is also running out and if they do increase the capacity of then network, they'll even squeeze out more of their infrastructure Because the volume of the network determines how much it costs to actually run one of these servers on their network So if the transaction volume rises because they lift the limit, then people actually get charged more for the bandwidth on the servers that they're running voluntarily for the network

So what about Dash's self sustaining network? By compensating the people that are running the infrastructure for the network, we actually have made a high performance network built on top of the line hardware, and that has high availability for the users of the network itself And this can actually scale with the network as it grows because as it grows, the profit will go up for those that are running these specific services for the network The Masternodes also do things separate from providing the core services to the network, like syncing and propagation And they do things like providing the transaction technology off-chain privacy and our Decentralized Governance and Budgeting system So they are a core feature of the Dash infrastructure

If you look at the graph on the left, you can see that We've had a continuous rise of our infrastructure over the past year and a half since we've introduced the incentivized program of the Masternode Network And we can actually tweek out these numbers if we wanted it to be 6000 or 12,000 or 24,000 or even 100,000 there are ways to do that and we know exactly how all of that works and can tweek it out whenever we need to in the future – just using some basic economic principles Masternodes also enable all of the fancy features we see in Dash Such as the Decentralized Governance and Budgeting Program, which then allows the Virtual Corporation to function efficiently and to pay for all of the expenses that are required for a normal company to operate Here we can see that, in a two tiered infrastructure, you have two types of nodes that are on the network

But they're doing the same things Except the second tier can do different things than the first tier And then Bitcoin just has one type of node on it's network and they're voluntary and unpaid and whereas ours are paid and incentivised so that the network can scale On Bitcoin they run on a variety of hardware all around the world with various uptimes, and you know, there is no requirements of the hardware

With ours, we can require specific storage amounts for the network, we could require specific CPU, we could require all sorts of things and then actually using proof of service, we can test those things to make sure that they're actually providing what they said that they would provide, and if they don't provide, they don't get paid And this also allows us to have really quick software updates Because you have to run the newest software on your Masternode to get paid for what you're doing And this means the whole network is usually on pretty much the same software – the same time Anyone can actually run a Masternode

And Masternodes are paid from the mining block reward And so in our network we take 45% of the block reward and give it to the Masternode Network for infrastructure costs then we take 45% of it and give it to the miners for the security of transactions, and then we take 10% of it, and that is for the Virtual Corporation to function efficiently and to pay for things that come up The more Masternodes there are, the safer the network is because a lot of the security features of the Masternode network require The more Masternodes there are, the safer the network actually is and the network uses probabilities to protect itself Because of the 1000 Dash that's required to start a Masternode, we can insure the safety of lots of different features on the network They also reduce price volatility because Masternodes can't sell their coins and run a Masternode And so lots of the coins are out of the supply and all of the commerce takes place in the last few percent of our currency Well what's required to start a Masternode? First you need 1000 Dash and this is essentially kept in an offline wallet and very rarely brought online to start the Masternode with

It also requires that you have a full node operating and that you designate that as your Masternode And then, as you're running this full node, it automatically provides all of these fancy services that Dash has But what about the economic theory behind the network? Because we have a pool of money available for the Masternodes to share, we have an economic balancing act that's going on If more nodes come on to the network at any given time, it means the profitability is reduced, and if the profitability is reduced, it might get too low for Masternodes to operate efficiently, and then they might drop off the network And then as it goes lower, it might get too high, so that it becomes very attractive again

And this is the continuous balancing that goes on the network Well, so what happens when transactions increase? Transactions increasing would involve a lot of users coming into the ecosystem, which means they're bringing money into the ecosystem If they bring money into the ecosystem, it means there is price appreciation, and that price appreciation is actually resulting in higher proffits for the Masternodes themselves And so over long periods of time, the profitability of our infrastructure is solid and can scale We use a bond model to describe the economic theory behind the Masternode Network Generally when investors look at bonds, they judge the amount of risk for the individual company or country that's issuing the bonds

And the perceived risk is actually the company or country defaults on their debt Which would mean that the investor doesn't get paid back Likewise, with the Dash Network, the risk is associated with the currency not being as useful in 10 years as it is today, or some catastrophic issue with the currency itself And so our current rate of return is about 14%, and as less risk is associated with the network itself, and people figure out that the network is here to stay, then the ROI (rate of interest) demanded will be less and less Because investors will feel comfortable putting their money into the system for long periods of time

This will result in less ROI, for example, 10%, or 9% ROI per Masternode per year Which also has a couple of other benefits to the network One, it reduces over-all volatility of the currency because all of the Masternodes lock up currency and so all commerce must take place in the last few percent of the currency itself And so if we have $100 MILLION taking place in the last 20% of the currency it means there's vast liquidity available within those 22% and thus, less volatility Over long periods of time, the Masternodes actually earn less and less money so in 5 years they earn 6%, in 10 years they earn 4

4% etc And this is due to the supply curve Being that Dash is a fixed currency, it's supply slowly declines over long periods of time This is the incentive of the Masternode, the Operators and the Core Team to be innovative and find other ways for the network to make money

And so there will be added on services For example, we could make a decentralized exchange, we could make a decentralized stock market or a decentralized, for example, we could make things like a decentralized implementation of a stock market, a Decentralized exchange, a decentralized instantaneously converting version of Etherium, or anything that you can imagine As far as we're aware, Masternodes are legal in every country and all they really do is provide services to the network they're full nodes that are compensated So there is really nothing illegal that could be going on there They're also paid in a cycle

And so they're paid every 5 – 10 days depending on how many Masternodes there are Besides this, they make about $30 a month presently And it costs about 5 – 10 dollars a month to run one So that was it for the Dash Masternode and Incentives video In the next video we'll be going over the services that Masternodes offer to the network and how all of those work in great detail

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